The Marketing Environment, Social Responsibility, and Ethics Part One Strategic Marketing and Its Environment Chapter 03 The Marketing Environment, Social Responsibility, and Ethics

Chapter Learning Objectives To recognize the importance of environmental scanning and analysis To explore the effects of competitive, economic, political, legal and regulatory, technological, and sociocultural factors on marketing strategies To understand the concept and dimensions of social responsibility To differentiate between ethics and social responsibility

Chapter Outline The Marketing Environment Responding to the Marketing Environment Competitive forces Economic forces Political forces Legal and Regulatory forces Technological forces Sociocultural forces

Chapter Outline (cont’d) Social Responsibility and Ethics in Marketing Economic Dimension Legal Dimension Ethical Dimension Philanthropic Dimension Incorporating Social Responsibility and Ethics into Strategic Planning

The Marketing Environment Environmental Scanning The process of collecting information about forces in the marketing environment Observation Secondary sources Market research Environmental Analysis The process of assessing and interpreting the information gathered through environmental scanning Accuracy Consistency Significance

The Marketing Environment (cont’d) Responding to Environmental Forces Reactive approach Passive view of environment as uncontrollable Current strategy is cautiously adjusted to accommodate environmental changes Proactive approach Actively attempts to shape and influence environment Strategies are constructed to overcome market challenges and take advantage of opportunities

Types of Competitors Competition other firms that market products similar to or that can be substituted for its products in the same geographic area Brand competitors—market products with similar features and benefits to the same customers at similar prices Product competitors—compete in the same product class, but their products have different features, benefits, and prices Generic competitors—provide very different products that solve the same problem or satisfy the same basic customer need Total budget competitors—compete for the limited financial resources of the same customers

Competitive Environment Monopoly A competitive structure in which an organization offers a product that has no close substitute, making it the sole source of supply Oligopoly A competitive structure in which a few sellers control the supply of a large proportion of a product Monopolistic competition A competitive structure in which a firm with many potential competitors attempts to develop a marketing strategy to differentiate its product Pure competition A competitive structure involving a large number of sellers, no one of which could significantly influence price or supply

Competitive Forces Monitoring Competition Helps determine competitors’ strategies and their effects on firm’s own strategies Guides development of competitive advantage and adjusting firm’s strategy Provides ongoing information about competitors Assists in maintaining a marketing orientation

Economic Forces Buying Power Resources, such as money, goods, and services, that can be traded in an exchange Income Disposable income—after tax income Discretionary income—disposable income available for spending and saving beyond the basic necessities of life Credit Wealth

Economic Forces (cont’d) Willingness to Spend An inclination to buy because of expected satisfaction from a product, influenced by the ability to buy and numerous psychological and social forces Expectations influencing the willingness to spend: Future employment Income levels Prices Family size General economic conditions (e.g., rising prices)

Figure 3.1: American Customer Satisfaction Index Source: American Customer Satisfaction Index, University of Michigan Business School, May 16, 2006, www.theacsi.org/press_releases/0506q1htm.

Positive Economic Indicators Business Cycle A pattern of economic fluctuations that has four stages: Prosperity Recession Depression Recovery Positive Economic Indicators Time

Stages in the Business Cycle

Political Forces Some organizations respond to political forces reactively. Some firms respond proactively: Campaign contributions, often as “soft money” Political action committees (PACs) Lobbying elected officials

Regulation Regulatory Agencies Self-Regulatory Forces Federal Trade Commission (FTC) influences marketing activities most; can seek civil penalties and require corrective advertising Self-Regulatory Forces Better Business Bureau National Advertising Review Board (NARB)

Major Regulatory Agencies

Major Regulatory Agencies (cont’d)

Technological Forces Technology Impact of Technology The application of knowledge and tools to solve problems and perform tasks more efficiently Impact of Technology Dynamic means constant change Reach refers to how technology quickly moves through society. The self-sustaining nature of technology as the catalyst for even faster development

Sociocultural Forces Sociocultural Forces The influences in a society and its culture(s) that change people’s attitudes, beliefs, norms, customs, and lifestyles Demographic Diversity and Characteristics Increasing proportion of older consumers Increasing number of people living alone Entering another baby boom Increasingly multicultural U.S. society

Sociocultural Forces Cultural Values Primary source of values is the family Values influence: Eating habits (healthier foods) Alternative health and medical treatment choices

Figure 3.2: U.S. Population Projections by Race Source: U.S. Census Bureau, “U.S. Interim Projections by Age, Sex, Race, and Hispanic Origin,” March 18, 2004, www.census.gov/ipc/www/usinterimproj/natprojtab01a.pdf.

Social Responsibility and Ethics in Marketing An organization’s obligation to maximize its positive impact and minimize its negative impact on society Stakeholders Constituents who have a “stake” or claim in some aspect of the company’s products, operations, markets, industry, and outcomes Marketing citizenship The adoption of a strategic focus for fulfilling the economic, legal, ethical, and philanthropic social responsibilities expected by stakeholders

Figure 3.3: The Pyramid of Corporate Social Responsibility Source: Archie B. Carroll, “The Pyramid of Corporate Social Responsibility: Toward the Moral Management of Organizational Stakeholders,” adaptation of Figure 3, p. 42. Reprinted from Business Horizons, July/Aug. 1991. Copyright © 1991 by the Trustees at Indiana University, Kelley School of Business. Used with permission.

Ethical Dimension Marketing Ethics Ethical Issue Principles and standards that define acceptable marketing conduct as determined by various stakeholders Ethical Issue An identifiable problem, situation, or opportunity requiring a choice among several actions that must be evaluated as right or wrong, ethical or unethical

Influence Factors of Ethical Standards Company Industry Government Customers Interest Groups Society Influence Factors Ethical Standards

Philanthropic Dimension Cause-Related Marketing The practice of linking products to a particular cause on an ongoing or short-term basis Strategic Philanthropy The synergistic use of organizational core competencies and resources to address key stakeholders’ interests and achieve both organizational and social benefits

Green Marketing The specific development, pricing, promotion, and distribution of products that do not harm the natural environment

Foundations of Consumerism The organized efforts of individuals, groups, and organizations to protect the rights of consumers Lobbying government officials and agencies Letter-writing campaigns and boycotts Kennedy’s Consumer “Bill of Rights” Right to safety Right to be informed Right to choose Right to be heard

Incorporating Social Responsibility and Ethics into Strategic Planning Ethics Individual and group decisions Social Responsibility The total effect of marketing decisions on society Overall Strategic Marketing Planning

Benefits of Codes of Conduct and Social Responsibility Codes of Conduct (Ethics) Formalized rules and standards that describe what the company expects of its employees Social responsibility and ethics improve marketing performance. Socially responsible companies (and their employees) can better respond to stakeholder demands. A company’s reputation for social responsibility is important to consumers’ buying decisions. Social responsibility and ethical behavior reduce the costs of legal violations, civil litigation, and damaging publicity.

Source: “Survey Documents State of Ethics in the Workplace,” Ethics Resource Center, press release, Oct. 12, 2005, www.ethics.org/nbes/nbes2005/release.html..

After reviewing this chapter you should: Recognize the importance of environmental scanning and analysis. Explore the effects of competitive, economic, political, legal and regulatory, technological, and sociocultural factors on marketing strategies. Understand the concept and dimensions of social responsibility. Differentiate between ethics and social responsibility.